Bank of America's Findings
According to Bank of America (BofA), the S&P 500 has historically averaged a 5% decline in the two-week window spanning the week before and the week after a shutdown, based on data going back to 1990. But the outcomes vary widely.
For example, during the 35-day partial shutdown from December 2018 to January 2019, the S&P 500 actually rallied 6%. By contrast, in October 1990, the index fell 5% during a three-day partial shutdown.
Here’s BofA’s breakdown of market performance around recent shutdowns:
| Shutdown Period | Days | Type | S&P 500 Net Change (%) | VIX Net Change (pts) | DXY Net Change |
10-Year Yield Net Change |
| 12/22/18–1/25/19 | 35 | Partial | 6 | -8 | -2 | -17 |
| 1/20/18–1/22/18 | 3 | Partial | 2 | 4 | -2 | 15 |
| 10/1/13–10/17/13 | 16 | Full | 3 | -1 | -2 | -14 |
| 12/16/95–1/6/96 | 21 | Full | -3 | 4 | 0 | 1 |
| 11/14/95–11/19/95 | 5 | Full | 3 | -1 | 1 | -10 |
| 10/5/90–10/9/90 | 3 | Partial | -5 | 3 | -3 | 2 |
| Average | — | — | 1 | 0 | -1 | -4 |
Source: Bank of America
Shutdowns vs. Debt Ceiling Crises
BofA strategist Mark Cabana told clients that markets usually care less about shutdowns than about potential breaches of the debt ceiling, which carry far greater risks for U.S. creditworthiness. Still, some analysts warn that the current weaker economic backdrop could make a shutdown more disruptive than in past cycles.
Trump's Warning to Agencies
President Donald Trump has instructed federal agencies to prepare for potential mass firings if lawmakers fail to reach a deal in time. While such rhetoric adds to the uncertainty, markets so far have taken the threat in stride.
What Investors Should Watch
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Volatility (VIX): Shutdowns often spark short-term spikes in volatility, though the effect tends to fade quickly once funding is restored.
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Treasury Yields: The 10-year yield has historically fallen during shutdowns, reflecting a flight to safety, though the moves are inconsistent.
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U.S. Dollar (DXY): The dollar index has typically weakened slightly, but again, the impact varies.
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Equities: While the S&P 500’s average move is negative, the wide range of outcomes suggests shutdowns are not a reliable predictor of stock performance.
The Bottom Line
History suggests that government shutdowns create short-term market noise rather than lasting damage. Investors may see some choppiness in equities, a bump in volatility, and modest moves in bonds and the dollar. But compared to debt ceiling standoffs, shutdowns are usually a sideshow.
That said, with the economy already facing headwinds, this time could prove more sensitive. For now, Wall Street is watching Washington closely, but not panicking—at least not yet.